Harry J. Paarsch

Piecewise Pseudo-maximum Likelihood Estimation in Empirical Models of Auctions

In applications of game theory to auctions, researchers assume that players choose strategies based upon a commo nly known distribution of the latent characteristics. Rational behavior, within an assumed class of distributions for the latent process, imposes testable restrictions upon the data generating process of th e equilibrium strategies. Unfortunately, the support of the distributi on of equilibrium strategies often depends upon all of the parameters o f the distribution of the latent characteristics, making the standard application of maximum likelihood estimation procedures inappropriat e. The authors present a piecewise pseudo-maximum likelihood estimator as well as the conditions for its consistency and its asymptotic distribution. Copyright 1993 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

The Response of Worker Effort to Piece Rates: Evidence from the British Columbia Tree-Planting Industry

We measure the elasticity of worker effort with respect to changes in the piece rate using panel data collected from the payroll records of a British Columbia tree-planting firm. Our data contain information on daily worker productivity and the piece rate received over a five-month period. Using a structural model to control for the endogeneity of the piece rate, we estimate this elasticity to be approximately 2.14. We also calculate a nonstructural lower bound to this elasticity equal to 0.77. Structural estimation also allows us to perform policy experiments and to compare firm profits under alternative compensation systems. Our results suggest that profits would increase by at least 17 percent were the firm to implement the optimal static contract as predicted by principal-agent theory. This increase in profits would be due to capturing worker rents after the revelation of private information over ability. Yet, only a negligible proportion of these rents could be captured while inducing workers to reveal ability truthfully, suggesting that dynamic considerations were important in determining the firms actual choice of contract.

Identification, Estimation, and Testing in Parametric Empirical Models of Auctions within the Independent Private Values Paradigm

Recent advances in the application of game theory to the study of auctions have spawned a growing empirical literature involving both experimental and field data. In this paper, we focus on four different mechanisms (the Dutch, English, first-price sealed-bid, and Vickrey auctions) within one of the most commonly used theoretical models (the independent private values paradigm) to investigate issues of identification, estimation, and testing in parametric structural econometric models of auctions.

A Survey of Recent Empirical Work Concerning Auctions

In this paper, the authors survey some recent empirical work concerning auctions, first outlining two complementary approaches to the empirical analysis of auctions and then discussing several recent developments in the econometric analysis of field data concerning auctions.

Center competition and outcomes following liver transplantation

In the United States, livers for transplantation are distributed within donation service areas (DSAs). In DSAs with multiple transplant centers, competition among centers for organs and recipients may affect recipient selection and outcomes in comparison with DSAs with only 1 center. The objective of this study was to determine whether competition within a DSA is associated with posttransplant outcomes and variations in patients wait‐listed within the DSA. United Network for Organ Sharing data for 38,385 adult cadaveric liver transplant recipients undergoing transplantation between January 1, 2003 and December 31, 2009 were analyzed to assess differences in liver recipients and donors and in posttransplant survival by competition among centers. The main outcome measures that were studied were patient characteristics, actual and risk‐adjusted graft and patient survival rates after transplantation, organ quality as quantified by the donor risk index (DRI), wait‐listed patients per million population by DSA, and competition as quantified by the Hirschman‐Herfindahl index (HHI). Centers were stratified by HHI levels as no competition or as low, medium (or mid), or high competition. In comparison with DSAs without competition, the low‐, mid‐, and high‐competition DSAs (1) performed transplantation for patients with a higher risk of graft failure [hazard ratio (HR) = 1.24, HR = 1.26, and HR = 1.34 (P < 0.001 for each)] and a higher risk of death [HR = 1.21, HR = 1.23, and HR = 1.34 (P < 0.001 for each)] and for a higher proportion of sicker patients as quantified by the Model for End‐Stage Liver Disease (MELD) score [10.0% versus 14.8%, 20.1%, and 28.2% with a match MELD score of 31‐40 (P < 0.001 for each comparison)], (2) were more likely to use organs in the highest risk quartile as quantified by the DRI [18.3% versus 27.6%, 20.4%, and 31.7% (P ≤ 0.001 for each)], and (3) listed more patients per million population [18 (median) versus 34 (P = not significant), 37 (P = 0.005), and 45 (P = 0.0075)]. Significant variability in patient selection for transplantation is associated with market variables characterizing competition among centers. These findings suggest both positive and negative effects of competition among health care providers. Liver Transpl 19:96–104, 2013.

On the asymptotic distribution of the transaction price in a clock model of a multi-unit, oral, ascending-price auction within the common-value paradigm

Using a clock model of a multi-unit, oral, ascending-price auction, within the commonvalue paradigm, we analyse the asymptotic behaviour of the transaction price as the number of bidders gets large. We find that even though the transaction price is determined by a (potentially small) fraction of losing drop-out bids, that price converges in probability to the ex ante unknown, true value. Subsequently, we derive the asymptotic distribution of the transaction price. Finally, we apply our methods to data from an auction of taxi license plates held in Shenzhen, China.

Is the ‘Linkage Principle’ Valid? Evidence from the Field

type=main> We present field evidence concerning experienced bidders that supports the linkage principle—specifically, the prediction that in affiliated-values auction environments the expected revenues generated at open-outcry, ascending-bid auctions are higher than those under auction formats that reveal less information to participants. Using field data from a large seller of automobiles who experimented with different selling formats, we have found that average revenues were significantly higher under an English auction than under a dynamic Internet auction format that revealed less information to bidders.

A Comparison of Estimators for Empirical Models of Auctions

Using structural econometric models of equilibrium behaviour in games with incomplete information to intrepret field data from auctions has become increasingly widespread. Several different estimation strategies now exist. In this paper, I compare the performance of these different estimators using a stylized empirical model of a procurement auction within the independent private values paradigm.

Micro-economic Models of Beef Supply

A series of micro-economic models of cow-calf and feedlot operators is developed in an effort to isolate factors important in beef supply. Slight changes in behavioural assumptions are shown to imply qualitatively different comparative static reactions on the part of these cattlemen. Some empirical examples of the feedlot operator are presented based upon an estimated weight gain function. Modeles microeconomiques doffre de boeuf: Lauteur developpe une serie de modeles microeconomiques du comportement des producteurs de veaux et des engraisseurs de betail afin didentifier les facteurs les plus importants dans la definition de loffre de boeuf. Des variations minimes dans le comportement presume se traduisent par des reactions qualitativement differentes des producteurs de betail en statique comparative. On presente quelques exemples empiriques du comportement de lengraisseur a partir dune fonction calibree de gains de poids.

The Effect of Stumpage Rates on Timber Recovery

Governments often sell the right to harvest timber on public land. If timber is of heterogeneous quality and timber pri ces reflect this heterogeneity, then charging a fixed stumpage rate per cubic meter of timber harvested independent of timber quality can induce the economically inefficient practice of harvesting only the best grades of timber, high-grading. Charging a lump sum that is independent of the volume of timber harvested yields the efficient choice of minimum timber quality. With competitive bidding, the lump-sum scheme extracts all of the resource rent while the stumpage rate scheme leaves some rent in the forest.